limited company Articles

How to close your limited company

Following changes to off-payroll working rules and the end of a 12-month ‘light-touch’ enforcement period, many contractors are finding it increasingly difficult to operate ‘outside IR35’ through a limited company.

Some contractors are now at risk of being permanently locked into high tax, low benefit ‘inside IR35’ arrangements.

How to go from sole trader to limited company contractor
marketing | 22 September 2021
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There are a number of advantages to operating through a limited company rather than as a sole trader. Working through a limited company is more tax-efficient. It also gives you limited liability, so you won’t be held personally responsible for business debts.

Contractor guide: Moving from a limited company to umbrella model in 2021
marketing | 11 January 2021
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Many contractors are likely to close their limited companies this year and subscribe to an umbrella company to try and avoid punitive new IR35 rules.

For the most part, limited company contractors love the tax advantages and the autonomy that comes with running their own personal service company (PSC). But a major shift in the way that IR35 legislation is applied in the private sector could lock thousands of contractors into high-tax, low-benefit arrangements.

If you tend to work very closely with your private sector clients and are at risk of being trapped in an ‘inside IR35’ contract, then switching to an umbrella company model of working could be the best move you make in 2021.

Support package announced for self-employed, but it won’t help everyone

Most of Britain’s five million self-employed workers breathed a sigh of relief yesterday when the government announced that they would receive taxable grants to make up for lost income during the coronavirus pandemic.

Chancellor Rishi Sunak announced that freelancers and contractors would be able to claim up to 80% of their profits from the state if they could prove that they had been adversely affected. But the grants will be capped at £2,500 per month and not everyone will be able to claim them - including contractors that work through a limited company.

In this blog post, we include more details about the support package and who is eligible to receive it. There’s also some good news for limited company contractors that can’t claim the self-employed support.

What expenses can limited company contractors claim

If you contract through a limited company, there are certain expenses that you can claim against your income to reduce your tax liability.

If your limited company makes £50,000 and you claim back £10,000 in allowable expenses, the taxable profit will be £40,000.

There are some rules governing what expenses limited company contractors can claim.

93% of contractors thought about using an umbrella company last year
marketing | 13 January 2022
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Following the introduction of new IR35 rules in April, more than 90% of contractors thought about ditching their limited companies for umbrellas in 2021.

New rules affecting private sector clients mean that contractors are much more likely to be judged ‘inside IR35’ when starting a new contract.

Chancellor eyes limited company tax increase

The Chancellor Rishi Sunak is thought to be considering a sharp increase in the rate of corporation tax, as the Treasury attempts to curb borrowing in the wake of the coronavirus pandemic.

Reports suggest that the tax, which is paid on the profits of limited companies, could gradually increase from 19% to as much as 25% by the end of the current parliamentary term.

Autumn Budget Could Cost Contractors

Reports suggest that the Chancellor Rishi Sunak could increase limited company contractor taxes to help reduce Britain’s COVID-19 debt.

The Autumn Statement isn’t expected until mid-to-late November at the earliest, but the rumour mill is already beginning to swirl - and tax hikes for companies and contractors look to be on top of the Chancellor’s agenda.

Contractors Stung by Dividend Allowance Cut

After wrapping up their tax affairs for the 2018/19 tax year, many limited company contractors will only now be waking up to the reality of the 2018 dividend allowance cut, which saw the tax-free dividend allowance drop from £5,000 to £2,000.

In 2018/19, this tax-free allowance was applied to the first £2,000 of dividend income. Above £2,000, dividends are taxed at a flat rate according to the tax band they fall into.

Private Sector IR35 Reforms: What It Means for You

The Treasury released new guidance on off-payroll working (IR35) in the private sector yesterday, following the Chancellor’s Budget speech.

Following a consultation on the rules, some commentators expected IR35 reforms to take effect from next year. But the policy paper reveals that the changes will be introduced in April 2020, giving businesses more time to prepare for the reforms

We’ve combed through the policy document, picking out the key points so you can understand how the changes will affect you.

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